Microsoft

August 24, 2011

It's a dangerous path to think that the iPad is just a PC, as numerous sources quoted Steve Balmer as saying at the 2010 D8 Conference. I'm not sure that he actually said exactly that, but that was the most common byline after his session. Holding on to that interpretation is surely delusional and not in Microsoft's best interests?

I think that Balmer actually said something like everything you can do on an iPad you can do on a PC, and it's just about form factor. And in fact just a couple of days ago one of the senior PR gurus at Microsoft echoed those exact words, so I guess that IS the party line:

They [tablets] are each highly optimized to do a great job on a subset of things any PC can also do. Poor Frank Shaw got well and truly hammered in the blogsphere for his post.

Whereas Steve Jobs had described the PC as being "like trucks", Blamer countered by saying shared devices e.g. a PC in the home are not going away, if only for cost reasons. (You know, Balmer should have said that there are some important things we do on a PC that are just a pain on an iPad - try blogging for example. But in any case his mental model is a liability.)

The mental model matters

So what's the problem in holding on to the mental model that the iPad is just a svelte PC?

For one, the iPad is making massive gains in market share, and creating new markets, and powering Apple to be an extremely serious competitor to Microsoft in some of it's core lines of business. Large corporations are buying large blocks of iPads and Apple cannot keep up with demand. The corporatization of IT is a big deal, and Apple is at the forefront of that wave.

And for another - the market doesn't believe you. Which means you will lose market share, even faster.

It's something different, and Microsoft's challenge is to find out what it is an how different. If they don't start with that attitude then they are likely to never bridge the gap.

By the way I don't actually know what it is. It is all of these things but what else:

a brand

a fashion statement

a geek statement

a business statement

a personal statement

a business tool

an entertainment tool and portal

a great way to interact with your children

a satisfying experience

fun

work

simple

quick

sharp

a personal assistant

part of Apple

not part of Microsoft.

What the "whole product" is, which is driving incredible wealth to Apple's bottom line, I don't quite know. Most obviously the iPad whole product is a LOT MORE than the device - which is what I think most of the other tablet makers don't quite get.

What the other tablets are IS just a piece of junk, a boat anchor - HP proved that! Of course Android will make some headway, and that headway depends on everything other than the tablet itself - the table is just a ticket to the game. But what is the game?

The "ecosystem" is a word, and a powerful one, which explains Apple's success. But it is not all.

If Microsoft have a mental model which is focused on the device a la the PC world, and the concept that they are just remodelling the form factor, then that is surely doomed to failure. Even if they don't quite understand it, as I don't, then they should approach the iPad "whole product" with a mindset that this is something different.

Let''s face it, if you've been dissing your competitor for years, and then failed at everything you've done where they've been beyond successful, then something isn't quite right with how you view what they are doing. (Examples: Zune - total failure; Retail Stores - total failure; Tablets - total failure; Mobile Phones - significant relative failure)

This is a different world and we need to understand it.

To do otherwise is to dance on the head of a pin, while the spoils fall to Apple in bucketloads.

Adjust the mindset - let go

There's no rocket science here. I'm just saying that it takes a "simple" Peter Drucker-ish adjustment to the mindset, and then progress can be made by Microsoft. And good luck to them, sometimes Apple gets on my nerves with their crappy attitudes to customers.

But hey, I'm still "queueing up" for my iPhone 5 !!

So let's see the mental model that the iPad is not just a PC, and see what Microsoft can turn out with it's incredible resources. That would be exciting. Another form-factored PC as a tabletwon't be.

August 12, 2011

I shouldn't be spending my time writing this post because it's more of a complaint about new management dissing the "old management" - but sometimes this goes too far and sets me off! New Nokia President and Head of North America Chris Weber does a good job of making out that previous Nokia management were essentially clueless and he's sorting all that out.

I'm just thinking, if I was a previous Nokia executive now being hung out to dry for my stupidity and narrow-mindedness I would want to see some stunning new insights from the new team in order to salvage my pride.

Don't hold your breath! The team now dissing the old team are turning out pretty much the same old revolving keyword phrases we hear from so many new incumbents. Let's take a look, for the sake of those who got axed!

1. For one thing this means that it was not the result of a long term strategy and decline in performance by the bulk of the Nokia management and employees. It was the result of a couple of recent critical decisions, certainly at the behest of the Nokia Board who foresaw the need for change, but it wasn't because of a lack of success across the whole firm; and,

2. At the time these big decisions were made Nokia was still not only a very successful play but a dominant one in many market segments it served. Sure it was a flop in the US and that certainly needed a whole new rethink.

So my point? You don't get to be dominant by having a bunch of unenlightened, unworldy fools in your leadership groups and executive teams.

But HEY I'm all for letting go of things that are passed their due date, and reinventing your business.

Where are things headed?

So what are the new big ideas? That's where it gets a bit depressing, and annoying, because the "new ideas" look like romper room with the head teacher explaining to grandma how to suck eggs.

make sure that there are lots of Nokia Windows Phones in stores for customers to test;

do a better job explaining why consumers should check it out.

To clinch his points Weber added this comment:

"Stephen Elop was smart to realize the mobile war is a war of ecosystems -- hardware, software, services, and carriers. It's not just about having the best phones or software platform."

It's all too sad isn't it?

Nokia had a deep understanding of "ecosystems" and ran some of the most complex in the mobile phone world. This was all established and being executed well before new CEO Elop arrived. And it is an area not yet penetrated by Microsoft, so it's hard to know what significant difference Microsoft experience can bring to that strategy. The core experience and expertise remains with those teams left in Nokia.

Let's put it this way - I think Nokia en-mass understood a lot more about how to make ecosystems work before Mr Elop turned up with his new insights.

If I was an ex-manager reading these new insights I'd be peeved.

Could these new "insights" have saved the day?

Put it this way, if all these new managers, excluding CEO Elop, had have been in place in Nokia in the lead-up to its implosion, would their revealed insights have saved Nokia from its demise?

I don't think so.

I'm sure that the new people are all very smart people. But so were the overwhelming majority of the previous incumbents.

I hope Nokia gets its act together. If it really came up with a meaty new strategy that would be great. But dissing the old team and then doing roadshows of PR business platitudes isn't going to save the day. I just think that the masses of (ex) managers in Nokia deserve a little more respect.

By the way, I do agree with Weber that Microsoft, in it's range of cloud services and enterprise connectivity, is really well placed, and ahead of all the competitors. That's a different issue to dissing all the previous Nokia management.

PS Because I researched Chris Weber seeking to find his social connections I have a little gratuitous advice for him - pay a little attention to your social spaces and places. If your Twitter handle is really @cweberatnokia then that isn't a wise choice, for numerous reasons one of which being that it sounds fake. If it IS real please use your real photo. Your Linkedin profile could do with updating re Nokia details and the only link is to your blog which with the last post on October 10, 2010.

August 10, 2011

I'm not a Microsoft basher, but the reality is that the curse of battling malfunctioning programs by restarting, un-installing, reinstalling, etc is a legacy we'll never forget. And especially when your PC gets a little older and fat around the middle and the restarts take longer than having a cup of coffee.

In came the iPhone and iPad and "instant on" was a real winner - precisely because we'd wasted months of our lives due to the Microsoft curse.

THEN came Skype for the iPad, released a few days ago, and ... what - crash crash crash, what the heck. Oh! Skype is owned by Microsoft now. OK - un-install, reinstall, crash crash crash. Hmmm... un-install, reboot, install, crash crash crash.

After 10 crashes in a row, with Skype never once opening properly, I gave up.

It's a pity. Microsoft does not deserve a lot of its poor reputation in regard to these types of difficulties, after all Windows is a massive platform. But there you go - what do we think of - another Microsoft poor release plan, poor test plan, now messing up the iPad experience.

This Microsoft / Skype app is the ONLY app which has failed so completely on my iPad. That's a ridiculous position for Microsoft to have put itself in, when it is completely and utterly avoidable. Let's face it 99% of iPad apps work really well first time.

The Skype app does work for some iPad users, perhaps a majority, but the failure rate is running at about 20% based on my observations.

Microsoft has oodles of outstanding researchers, teams of talented technical developers, and should have never been in this position.

Come on Microsoft get it right for the 20% of people who've seen nothing but crashes out of Skype for iPad. We're all keen to use it!

Did you experience Skype crashes on your iPad?

How is it that a problem which effects 20% of users gets through the testing system of Skype / Microsoft and of Apple?

PS Just to reinforce that I'm not a Microsoft sceptic if I think about all the elements of their cloud strategy then I believe that it is very powerful and that they are a long way ahead of most of their competitors. If I think about their subscription licensing business model then I know that they are way ahead of all of their competitors - it takes a lot of internal pain, culture change, people shift, reward reconstruction and channel realignment and Microsoft have been at it for 7 or 8 years. They've suffered but they have put a clear gap between themselves and anyone else - think HP, or Oracle, or IBM - they haven't even started the real journey yet. Microsoft has some powerful assets and positioning. Let's get their skills onto fixing Skype on the iPad!

July 27, 2011

With this post I've shamelessly copied my colleague Wendy Soucie in having a collection of blog comments, as a post, each week. As Wendy says "one of the ways I participate in the social web is to spend some time each week reading and commenting on blogs and shared content". And she references the Social Media Academy NCP model - Network Size, Contribution, Participation. Wendy and I are both graduates of the Academy and also Founding Partners of the Social Business Consulting Group.

Here are two blog posts which caught my attention and where I commented:

The reasons retailers will fail, written by Dennis Price, caught my eye in The future is bleak, unless… Dennis discusses research conducted by Lewis & Dart (2011) on what is happening in the retail channel. They predict that 50% of traditional retailers/brand will fail.

What motivated me to comment was because I was struck by the fundamental changes hitting retail - not dissimilar to the mega-trends I try to figure of cloud computing, social business, mobile and collaborative commerce and the impact at the point of intersection on today's businesses. I noted that in my experience the ways business leadership teams react seemed to be the same across many sectors, including, apparently, retail.

If you're interested in this wave of change then there are many interesting comments.

But undoubtedly the biggest buzz and the highest participation rate was in response to Asymco's post about the PC versus the iPad.

That really caught my attention as a potentially disasterous mental model for Microsoft around which to wrap their strategies. As I said in my comment: "Hanging on to the belief, the mental model, that the "whole product" of the iPAD is that of a PC sounds extremely dangerous to me, and I'm disappointed in Microsoft."

There's a huge flurry of comments, worth reading.

Because of Nokia's implosion it's a live action case study in management and strategy, and I also tried to leave a comment at Tomi Ahonen's blog where he does the best analysis of this in the business, but after several failed attempts I just could not get my post accepted so I quit. If you're interested in the mobile business, or just plain business strategy, Tomi's posts on Nokia are a must read.

How do you see physical retail competing most successfully with online?

How dangerous is Microsoft's belief that the iPad is just a PC?

What lies behind the disasterous collapse of Nokia, and what is it's best path forward?

June 30, 2011

After more than eight months of hype Microsoft's cloud-based productivity suite, Office 365, formally went live Tuesday with Microsoft launch events from New York and around the world. Google Apps has proclaimed a premature victory, but as we all know price isn't everything - both Office365 and Google Apps will be winners.

Google reacted with 365 reasons to consider Google Apps on the Official Google Enterprise Blog. Frankly I thought that it was an immature response; perhaps it just illustrates that if you're not using a competitor's product in earnest then you'd better be careful what you say it cannot do. The fact that in the post Google could only come up with 4 reasons, and those were barely credible, made for poor PR.

A lot of fluff, and unnecessary. Both Google and Microsoft will benefit from the launch of Office365, for the following reasons.

1. Office365 raises the whole perception of the cloud to new level of trusted service

Sure, we've had cloud now for a while, and we know about Dropbox and various very useful ancilliary services we use daily in the cloud. And we've had Google Apps for a good while. But let's get real, Google Apps is still struggling - it's doing OK but not making much money for anyone. See for example that Keboko Ltd in the UK, a cloud evangelist and Googe Apps reseller just folded - not due to no sales but to the long tail of the 20% margin taking far longer to kick in than the business could support. That is, cloud has been feasible, but hard to achieve and harder to sustain for resellers.

Office365 brings cloud to everyone's desktop, in a familiar and virtually transparent mode. AND, it runs "off-shore" for Australians - out of Microsoft's data centre in Singapore. In one fell swoop that takes a lot of the heat out of the "offshore" argument - because actually no-one really cares and it becomes a non-argument - it just reverts to a sales trick but with far less momentum. And on this count of non-local computing Office365 and Google Apps help each other.

Google Apps will benefit from the realignment of the general acceptance of cloud computing for the everday desktop. Office365 will improve the achievability of Google Apps partners surviving!

On the basis of getting rid of infrastructure Google Apps and Office365 will come out square, except that with Office365 you'll be able to do it on a phased transparent basis, as against a big-bang basis with Google Apps. If we're getting serious here, we'd have to add in the cost of retraining to Google Apps. That's a sum which is going to far far exceed the $22 savings for the first year of Google Apps.

And if we're getting serious we have to also say that Office365's collaboration and communication capabilities are a world apart from Google Apps. No-one, except the Official Google Enterprise Blog, is going to claim that anything offered by Google Apps matches up to Exchange, Sharepoint, and Lync (the old communication server). Lync itself is an under-rated component of the Office365 offer - the unsung hero as PC World puts it, and off course Skype fits in there somewhere.

There is huge value in that extra $22 charged by Office365. Contrary to popular belief, I expect that this small difference, for such a large value-increment, is going to put a lot of pressure on Google Apps.

3. Office365 will accelerate the restructuring of the channel, helping Google Apps

Office365 proclaims that "cloud" is here to stay. Microsoft CEO Steve Balmer proclaimed Office365 is where Office meets the cloud. Up until now the cloud - as it is thought of by business - has been a bit foggy, and that also applies to the channel and resellers, where discontent has been running high.

From now on, If you’re not asking yourself if the cloud is right for your company, your CFO, CIO, or other another executive, or a competitor, will. Office365 is going to catalyse those questions, raise their profile, and accelerate change. It's a key strategic leg for Microsoft, and they will make sure it is on every business agenda possible.

This means that Microsoft will also have to sort out their relationships with their hundreds of thousands of service-provider partners. They have been working on that for years now, and through BPOS learnt some tough lessons. They are actually far more advanced in tackling this very tough problem than any other vendor, in my opinion. Compare Google's partner and channel experience to Microsoft's - it doesn't compare - Google's doesn't even rate on that scale.

But as Microsoft get on top of this, and as the channel adjusts and restructures, Google will be able to leverage the enormous effort put in by Microsoft to create its own advantage. There are no doubt new channel opportunities for cloud services - it's about how to reinvent the channel not replace it, and to avoid the business dangers.

Conclusion

At the end of the day, I think that Office365 is good for everyone - for business, for users, for cloud, for Google, for the channel, for consultants, and for the future of IT. Whether the ultimate "winner" will be the total off-premise Google model, or the combo on-premise off-premise model of Microsoft I don't know. Although I do feel for now that the combo cloud plus on-premise vendors are best placed for the SMB SaaS opportunity.

June 07, 2011

News is pouring out of the WorldWide Developers Conference but here are is simple snapshot of the numbers for Apple. Impressive all round:

Over 25 million iPads have been sold since the original 2010 launch

More than 15 billion songs have been sold via iTunes Music Store - making Apple the biggest retailer of music worldwide

14 billion apps have been downloaded from App Store (which includes 90,000 just for the iPad)

iBookstore has seen 130 million e-book downloads

Apple has paid out over $2.5 billion to developers

There are more than 225 million accounts with credit cards and one-touch purchase power.

Not to mention that at market close on June 3 Apple exceeded the market cap of Microsoft (market value of $201.59 billion) and Intel ( $115.21 billion) combined. The closing value of Apple was $317.60 billion. Some pundits predict that Apple will rise to "its natural level" of over $500, and then be worth more than Dell, HP, Microsoft and Intel combined!

There may be Apple detractors and Apple zealots, but the facts of comparing Apple to Microsoft and Intel in June 1998, and now, are astounding.

Am I completely bamboozled or is that a 100X yes ONE HUNDRED TIMES increase in market cap for Apple!? Whereas Microsoft and Intel are roughly the same (not taking into account inflation which means they have declined in purchasing power terms).

That's not to mention the sad story of Nokia, 10 times bigger than Apple in 1998 and now 10 times smaller in market cap, and in free-fall.

To quote g4dualie: "Apple changed the rules of the game to level the playing field. Under Microsoft’s dynasty, might made right (market share) and with Apple’s resurgence came a new meme; intelligence is fashionable. Work smarter for a better return on investment".

Apple is a powerhouse at the moment, and leading the charge in business model innovation.

Do you think Apple will continue to define the playing field for it's competitors?

How do you think that Apple will continue to maintain it's distance from the others?

Where will the competition come from, current players or a new entrant?

Irrational fears still drive decision-making: - better control over inhouse applications and data than cloud 57%- cloud services unproven and too risky 30%- data not secure in the cloud 30%

There is a strong prevailing belief that local presence is "critical or important" ( 82% )

This belief, which I also believe is irrational, never-the-less provides good opportunities for local service providers

The highest growth areas for those opportunities are the vanilla services such as data archiving and compliance, file sharing, and web conferencing - slide #9 - followed by CRM and collaboration.

Findings don't align with Microsoft's global online services strategy

It's all rather ironic since Microsoft's "All In the cloud" strategy is entirely about selling online services directly to SMB's - globally. For example, Australia is serviced out of a data centre in Singapore. Well actually who cares where, except that predictably our SMB survey audience still do!

It also has to be the grand plan, even if not trumpeted from the roof of MS HQ, that base level of global online services includes supportsufficient to attract customers, and therefore to cut out local support requirements - think email, web conferencing, file sharing, storage and backup, archiving and compliance.

That leaves accounting and payroll, CRM, collaboration, and specific business applications as potential value-added areas for local service providers.

Milk the cash cow of ignorance

The good news is that the SMB's irrationality and ignorance of cloud provides a so-called "window of opportunity" for local service providers to leverage the "local presence" bandwagon.

There is also the legitimate value of migration services, and although one-off this can be good cash for local providers, providing that they have very cost effective migration tools (if they don't, this could be done by remote or offshore or at least non-local specialist providers).

They can use that cash-flow to transform their own business, in anticipation of their SMB customers becoming educated about cloud, to support higher value offers and support for the more complex cloud services.

It seems callous to take money from the ignorant but according to the survey SMBs are willing to pay for their irrationality so it is a golden opportunity for transformation for local service providers.

Action plan, from the survey

The plan is - focus on the SMB segment currently or planning to access email through multiple methods, milk the full suite of current services for local support, pick up the cloud migration projects, sell hard into the highest cloud growth areas as that's where the customers have an appetite, and use the funds to build value-add in cloud accounting and payroll, CRM, collaboration, and specific business applications.

What is your main conclusion from the survey?

What do you see as the greatest opportunity for local service providers in support of SMBs using global online services?

March 24, 2011

The BBC recently published an article which became popular in the buzz - Getting your business cloud-ready. This was often retweeted as "cloud taking off in 2011". The essence of the article was captured by an early paragraph header - "From zero to server in 30 seconds".

It's this type of common misunderstanding of cloud which pervades the media, both popular and technical, and it's a great pity because it comforts people in the face of an oncoming tsumani.

Three reasons that the "infrastructure" myth of cloud pervades the conversation are because of vested interests, business inertia, and poor sales models.

It's not about scaling infrastructure

The Cloud: Battle of the Tech Titans - in BusinessWeek recently, was a good overall coverage, but fell for the same line about cloud being just more "stuff" which we have all seen before, but this time massively scaled:

What's different this time—as compared with the rise of the mainframe or the PC—is scale.

Wrong! That's actually what's the same as could be extrapolated from the past. Sure, scale leads to economies, but that's only the motivation for change not the strategic benefit. It's not the core of cloud.

The danger of "business as usual"

Let's take another look, we find thousands of articles with this type of definition:

A cloud computing solution is essentially a move from a traditional premise-based IT infrastructure to computing services that are delivered as a utility from a remote datacenter.

Sure, if that IS your definition then cloud isn't any different. Could reading that type of definition make you think that cloud is an enabler of business transformation, on a scale not yet seen in the history of IT?

I don't think so. Therein lies the danger.

It's a danger for service providers - they can go out of business. It's a danger for IT staff, a core of those, say 20% will become redundant. It's a danger for vendors of stuff you put in your own real estate - from software licences to hardware iron. It's a danger to businesses, because they can rapidly become uncompetitive.

3 reasons the misunderstanding continues

So if all this is true, why is cloud misunderstood?

Here are three reasons:

Vested interests. Vested interests in the current products, services and supply models, and buyers, want it to be seen as "business as usual". The Business Week article quoted above hit the nail on the head: "Gin up a pitch that sounds good to cautious CIOs and will ensure another round of technology purchases." Nothing wrong with that, it is the way of the world - it's the little Dutch boy holding his finger in the hole in the dyke, except that it won't have that happy ending. This is a very powerful force, it will prevail for years, and if history repeats those responsible will have moved on when the downside consequences manifest themselves.

Business inertia. The vast majority of businesses, despite the literature and legend of management advice about forward planning and strategy and positioning etc etc, do not act until driven by fear, or competition, or cost cutting necessity (which could be thrown back into to fear basket). At the moment, in the cloud revolution, businesses do not feel any fear from cloud-enabled and cloud-agile competitors, or cloud-enabled and cloud agile customers making new demands, and they don't feel the pain of uncompetitive cost burdens in their organisation from their current IT investments and implementation. They will continue in "business as usual" mode until fear or cost burdens force change. Cloud is all about business NOT as usual, but it will take a while to impact.

Sales models. The cloud vendors, be that Amazon or Google or even "old" Microsoft, are stuggling with their sales and channel models, which results in most often the lowest common denominator of cloud services being sold, which is the simple infrastructure scale-up scale down. This is just a "virtual" replacement for owning your own stuff. All three have a problem in that they have no channel to promote and assist with the real business transformation of cloud. Microsoft has an additional problem in the hostility of thousands of current service provider partners who see cloud as a threat to their livelihood. This is a deeply unsettled distribution issue.

Opportunity for agile businesses

None of these reasons is going to fade quickly. They are all deep-seated. The period over which their influence will decline is years.

This represents a fantastic opportunity for those businesses that do get the real business transformational value of cloud to get way ahead. In fact this is a seminal point in computing history for this breakpoint to happen, it may not present itself again for another 20 years.

Those business that do assess cloud in it's full potential and consciously align that potential with their business strategy will outpace their competitors, I have no doubt.

Clouds are ecosystems - offering business advantage

Clouds are about ecosystems, about large collections of interacting services including partners and 3rd parties, about inter-cloud communication and sharing of information through such semantic frameworks as social graphs.

A cloud ecosystem is a collective set of capabilities from multiple organizations and potentially services spanning multiple platforms and cloud environments which together form an ecosystem which feeds and build upon each other.

That's CLEARLY business transformational, whereas "computing services that are delivered as a utility from a remote datacenter" are NOT.

March 01, 2011

I like TechWorld's article on how Mo’s Mobiles, is using Google Apps to bypass the IT department — not that I have anything against the IT department, nor Microsoft for that matter. It's just a good account of the business thinking of the owner Tim Levy and how he ended up at Google Apps.

The article is well written, and I can't add to it. What grabbed me about it is that it is a real demonstration of the business and competitive benefits of cloud computing. This is despite the fact it hardly uses cloud in the real sense, it just relates to the vernacular sense of "using hotmail" or in this case Google mail, plus the web app store.

I'm still surprised by the amount of resistance to even thinking about the cloud, across a wide range of businesses. It seems so easy to say "I want my data in Australia/Melbourne/under my staircase/whatever" and that effectively ends the conversation. I'm not an evangelist, nor a technology geek. I don't really care if people change or not, and if old technology is fit-for-purpose then that's fine.

My only response is in respect to competition. I say something like "well you'll do fine just as long as your competition or your customers don't figure out how to use this cloud stuff to make life very uncomfortable for you. And my bet is they will, not sure when, but there is the real potential. But if they don't then you'll have made the right decision to have not wasted any effort on considering the possibilities".

Mo's Mobiles is all about these business benefits, and Tim Levy mentions several:

Agility: "I find small and medium businesses run their businesses faster than their IT department can catch up. It’s such a bottleneck, and businesses like Google that really get the Cloud allow people like me to add functionality to their business."

(Now standardised on Google Apps), Levy said his stores have improved retail execution by 30%, thanks to better information flow and workflow automation.

(They have also made use of third-party applications such as FormAssembly via the Google Apps Marketplace to help control transactions and monitor performance.) "We built it in two days", Levy said. "It costs us $200 a month for all our stores to use and we have full visibility – we are able to make third parties accountable for doing things for us."

I think that these are impressive competitive gains, in a company with a zero-IT department. Think of it, agility, operational excellence, and reduced information gathering and compliance costs.

I also very much liked the honest appraisal of the Microsoft option

"We played around for a good three to six months,” Levy said. “To be honest, the Microsoft products were, in terms of ease of use at the time, probably ahead. Our staff were more comfortable using Microsoft Office and more familiar with it. But the Google platform had the breadth of functionality and search was fundamental; unless staff can find information quickly, it’s hopeless."

All up, an inspiring article about the potential power of where cloud computing can take a small distributed business in a hurry.

What's your best small business cloud story?

What's your best cloud story relating to bringing competitive pressure into a segment?

So with all this optimism what gives with Barron's headline "A Private Party" - Big companies are quickly adopting new computer networks known as "private clouds." That may mean trouble for major tech suppliers?

Question: If companies are buying more private clouds - that is in layman's terms buying more of the same stuff to load up their data centres - then how can vendors be on the losing side? (It stands to reason, although it is not common logic, that the losers are the customers. The vendors are going to suck $12 billion out of customers, and that's just on hardware, and in return the customers essentially get business as usual.)

Great question, and it turns out the answer is that companies are converting to "private cloud" so fast that they are becoming more and more confident to take the next step to the real cloud.

It's that next step which is the Cloud Shift, and where real business benefits can start to accumulate. "Private cloud" is just gaining better productivity from your owned IT resources by using some of the technologies from the real cloud. It's more of the same and business as usual for customers, but a gold mine for salespeople selling "stuff" and that was the hope for the next 4 or 5 years.

It's an easy sell. A CEO hears about cost savings in moving to the cloud and calls up his IT chief. The IT chief, fully armed and briefed by the vendors who want to sell their products, slides into the chair, nods wisely about the potential savings and better use of capital, and then throws out the usual FUD about security etc. The CEO reflects on these risks to his bonus, and then during that pregnant pause the IT chief throws a lifeline into the ring - but we can get all those benefits if we built a cloud ourselves!

Viola! Everyone wins, on the surface at least, and the lastest round of gear is readied to be shipped into the data centre along with the upgrades to air conditioning, energy equipment, physical security, power supplies, and all those other things which add nothing to your competitive offer.

But the reality is that the customer's business has lost. And the vendors know that they have a limited window to exploit the opportunity to extract money from the customer's shareholders. What the Barron's report shows is that this window is closing much faster then we expected (at least in the US).

It's a good account. The key point being that the shift to "private" clouds, is going so well that big companies may be ready for the next phase of cloud computing years sooner than either Wall Street or Silicon Valley expected".

In other words, corporate customers gradually will be cutting back on big-ticket items and redirecting smaller amounts of money to computer-services providers.

That's tectonic news! Not only because sales will drop because of the massive efficiencies of the real cloud providers, but because:

[public cloud providers are] not willing to pay premium prices for branded hardware. A well-known example of this is Google, who bypasses traditional vendors and specifies and procures its servers directly from Asian contract manufacturers. Other large-scale datacenter operators are starting to pursue a similar strategy. Vendors like Dell and HP have responded by offering stripped-down servers designed to customer requirements. The problem for these vendors is that the selling prices and profit margins on these systems is lower than traditional models, as noted by a comment to the article.

That's one huge aspect, and the other is the fundamental one that massive cloud operators are enormously more efficient at managing and allocating resources than 99.9% of the of the world's IT shops. The big impact will be on the capital spending portion of the in-house IT spend, which some Wall St analysts are now predicting to decline significantly in a relatively short time frame. That must send a shiver up the spine of the likes of EMC for example.

Barron's says that for "Cisco, Oracle and HP to get in the game, it will probably require some key acquisitions... As their customers turn to the cloud, these fierce competitors will be fighting over a shrinking enterprise pie, increasingly selling their servers, storage and networking gear to what's expected to be just a handful of major cloud-service providers".

From an investor's viewpoint the real winner might just be Microsoft. Other public cloud providers such as Google and Amazon are trading on high multiples due to the success and growth prospects of their other lines of business. In contrast, Microsoft's price has been depressed, yet is has the best on-premise to cloud offers in the market and is poised for rapid growth in cloud services.

What's really going to happen to the others? Well it's not likely that HP nor Oracle are about to disappear, but it is likely that there will be major industry disruptions and new players emerging to claim their share of the public cloud of the future. The winners will actually be those businesses that best get their head around the Cloud Shift and cease investing in internal infrastructure that is not related to achieving that shift to the cloud.

Tammy Bruce said of Jesse James - last married to Sandra Bullock - "you can take the boy out of the ghetto but not the ghetto out of the boy". In a similar vein you can take the computing out of cloud computing but not cloud computing out of the cloud. The Cloud Shift hinges on that realization, and thankfully it's progressing well.

Do you see an acceleration of the transition through "private cloud" to real cloud?

How do you think the hardware and software product vendors will respond?

Which new entrant into public cloud do you think will cause the biggest industry disruption?